SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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(MARK ONE)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006
 [  ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO  _____________
Commission file number 0-12254



SCIENTIFIC TECHNOLOGIES INCORPORATED



|Oregon                                                         | 77-0170363                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

6550 Dumbarton CircleFremont, CA     94555

(510) 608-3400

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   x No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    o
         Accelerated filer    o
         Non-accelerated filer    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act). Yes
oNo x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
  Common stock outstanding as of July 31, 2006 was 9,833,852 shares.




Note:PDF provided as a courtesy



SCIENTIFIC TECHNOLOGIES INCORPORATED
Quarter Ended June 30, 2006

TABLE OF CONTENTS

|PART I. Financial Information                                                                                        | Page No.
|-------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                                     |         
|Item 1. Financial Statements (unaudited):                                                                            |         
|                                                                                                                     |         
|Condensed
Consolidated Balance Sheets as of
           June 30, 2006 and December 31, 2005                           | 3       
|                                                                                                                     |         
|Condensed
Consolidated Statements of Operations for the
           Three and Six Months ended June 30, 2006 and 2005 | 4       
|                                                                                                                     |         
|Condensed
Consolidated Statements of Cash Flows for the
          Six Months ended June 30, 2006 and 2005            | 5       
|                                                                                                                     |         
|Notes to
Condensed Consolidated Financial Statements                                                                 | 6-13    
|                                                                                                                     |         
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations                        | 13-17   
|                                                                                                                     |         
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                   | 17      
|                                                                                                                     |         
|Item 4. Controls and Procedures                                                                                      | 18      
|                                                                                                                     |         
|PART II. Other Information                                                                                           |         
|                                                                                                                     |         
|Item 1. Legal Proceedings                                                                                            | 18      
|                                                                                                                     |         
|Item 1A. Risk Factors                                                                                                | 18      
|                                                                                                                     |         
|Item 6. Exhibits                                                                                                     | 24      
|                                                                                                                     |         
|Signatures                                                                                                           | 25      

2

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PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

SCIENTIFIC TECHNOLOGIES INCORPORATED
                  CONDENSED CONSOLIDATED BALANCE SHEETS  
                  (Unaudited, in thousands, except for per share data)

|Assets                                                    |   | 2006   |  |   | 2005  
|--------------------------------------------------------- | - | ------ |  | - | ------
|Current assets:                                           |   |        |  |   |       
|Cash and cash equivalents                                 | $ | 6,356  |  | $ | 4,773 
|Short-term investments                                    |   | 2,478  |  |   | 2,480 
|Accounts receivable, net                                  |   | 9,157  |  |   | 9,085 
|Receivable from Parent                                    |   | 300    |  |   | 228   
|Inventories                                               |   | 8,899  |  |   | 8,414 
|Deferred income taxes - current                           |   | 1,772  |  |   | 1,772 
|Prepaid expenses and other current assets                 |   | 552    |  |   | 640   
|Total current assets                                      |   | 29,514 |  |   | 27,392
|                                                          |   |        |  |   |       
|Property and equipment, net                               |   | 3,444  |  |   | 3,224 
|Deferred income taxes - long-term                         |   | 2,341  |  |   | 2,341 
|Investments and other non-current assets                  |   | 905    |  |   | 785   
|Goodwill                                                  |   | 216    |  |   | 216   
|Other intangible assets, net                              |   | 1,597  |  |   | 1,764 
|Total assets                                              | $ | 38,017 |  | $ | 35,722
|                                                          |   |        |  |   |       
|Liabilities and Shareholders' Equity                      |   |        |  |   |       
|Current liabilities:                                      |   |        |  |   |       
|Accounts payable                                          | $ | 3,647  |  | $ | 2,481 
|Accrued expenses                                          |   | 1,361  |  |   | 1,185 
|Accrued compensation                                      |   | 2,716  |  |   | 2,477 
|Current portion of capital lease with Parent              |   | --     |  |   | 68    
|Total current liabilities                                 |   | 7,724  |  |   | 6,211 
|                                                          |   |        |  |   |       
|Capital lease with Parent                                 |   | --     |  |   | 28    
|Deferred income taxes                                     |   | 708    |  |   | 708   
|Total liabilities                                         |   | 8,432  |  |   | 6,947 
|                                                          |   |        |  |   |       
|Commitments and contingencies (Note 7)                    |   |        |  |   |       
|                                                          |   |        |  |   |       
|Shareholders' equity:                                     |   |        |  |   |       
|Common stock, $.001 par value; 100,000 shares             |   |        |  |   |       
|authorized; 9,810 and 9,786 shares issued and outstanding |   | 10     |  |   | 10    
|Capital in excess of par value                            |   | 6,182  |  |   | 6,022 
|Retained earnings                                         |   | 23,393 |  |   | 22,743
|Total shareholders' equity                                |   | 29,585 |  |   | 28,775
|Total liabilities and shareholders' equity                | $ | 38,017 |  | $ | 35,722

The accompanying notes are an integral part of these financial statements.

3

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SCIENTIFIC TECHNOLOGIES INCORPORATED
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
                  (Unaudited, in thousands, except per share data)

|                                             |  |   | Three Months   |  |   | Six Months    
|-------------------------------------------- |  | - | -------------- |  | - | --------------
|                                             |  |   | Ended June 30, |  |   | Ended June 30,
|                                             |  |   | 2006           |  |   | 2005          
|Sales                                        |  | $ | 17,188         |  | $ | 14,941        
|                                             |  |   |                |  |   |               
|Cost of sales                                |  |   | 10,015         |  |   | 8,771         
|Gross profit                                 |  |   | 7,173          |  |   | 6,170         
|                                             |  |   |                |  |   |               
|Operating expenses:                          |  |   |                |  |   |               
|Selling, general and administrative          |  |   | 5,906          |  |   | 4,340         
|Research and development                     |  |   | 1,122          |  |   | 1,122         
|Amortization of intangible assets            |  |   | 47             |  |   | 47            
|Total operating expenses                     |  |   | 7,075          |  |   | 5,509         
|                                             |  |   |                |  |   |               
|Income  from operations                      |  |   | 98             |  |   | 661           
|                                             |  |   |                |  |   |               
|Interest and other income, net               |  |   | 184            |  |   | 89            
|                                             |  |   |                |  |   |               
|Income before income taxes                   |  |   | 282            |  |   | 750           
|                                             |  |   |                |  |   |               
|Provision for income taxes                   |  |   | 126            |  |   | 240           
|                                             |  |   |                |  |   |               
|Net income                                   |  | $ | 156            |  | $ | 510           
|                                             |  |   |                |  |   |               
|Net income per share:                        |  |   |                |  |   |               
|Basic and diluted                            |  | $ | 0.02           |  | $ | 0.05          
|                                             |  |   |                |  |   |               
|Shares used to compute net income per share: |  |   |                |  |   |               
|Basic                                        |  |   | 9,795          |  |   | 9,772         
|Diluted                                      |  |   | 10,053         |  |   | 9,772         

The accompanying notes are an integral part of these financial statements

4

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SCIENTIFIC TECHNOLOGIES INCORPORATED
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
                  (Unaudited, in thousands)

|                                                      |  |   | Six Months     | 
|----------------------------------------------------- |  | - | -------------- | 
|                                                      |  |   | Ended June 30, | 
|                                                      |  |   | 2006           | 
|Cash flows from operating activities                  |  |   |                | 
|Net income                                            |  | $ | 650            | 
|Adjustments to reconcile net income to cash           |  |   |                | 
|provided by operating activities:                     |  |   |                | 
|Stock-based compensation                              |  |   | 11             | 
|Allowance for doubtful accounts                       |  |   | (32)           | 
|Depreciation and amortization                         |  |   | 758            | 
|(Gain) Loss on disposal of property and equipment     |  |   | (6)            | 
|Warranty reserve                                      |  |   | 106            | 
|Changes in assets and liabilities                     |  |   |                | 
|Accounts receivable                                   |  |   | (40)           | 
|Inventories                                           |  |   | (485)          | 
|Receivable from Parent                                |  |   | (72)           | 
|Prepaid expense and other assets                      |  |   | (32)           | 
|Accounts payable                                      |  |   | 1,166          | 
|Accrued expenses                                      |  |   | 309            | 
|Cash flows provided by operating activities           |  |   | 2,333          | 
|                                                      |  |   |                | 
|Cash flows from investing activities                  |  |   |                | 
|Purchase of short-term investments                    |  |   | (444)          | 
|Proceeds from sale of short-term investments          |  |   | 446            | 
|Proceeds from sales of fixed assets                   |  |   | 12             | 
|Purchase of property and equipment                    |  |   | (817)          | 
|Cash flows used in investing activities               |  |   | (803)          | 
|                                                      |  |   |                | 
|Cash flows from financing activities                  |  |   |                | 
|Repayment of capital lease with Parent                |  |   | (96)           | 
|Decrease in bank overdraft                            |  |   | --             | 
|Issuance of common stock                              |  |   | 149            | 
|Cash flows provided by (used in) financing activities |  |   | 53             | 
|                                                      |  |   |                | 
|Change in cash and cash equivalents                   |  |   | 1,583          | 
|                                                      |  |   |                | 
|Cash and cash equivalents at beginning of period      |  |   | 4,773          | 
|Cash and cash equivalents at end of period            |  | $ | 6,356          | 
|                                                      |  |   |                | 
|Supplemental disclosure of non-cash activities:       |  |   |                | 
|Cash paid to Parent for income taxes                  |  | $ | -              | 
|Cash paid to Parent for capital lease                 |  | $ | 96             | 

The accompanying notes are an integral part of these financial statements.

5

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SCIENTIFIC TECHNOLOGIES INCORPORATED
                  NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  (Unaudited)


1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements for the three and six months ended June 30,
2006 and 2005 are unaudited and have been prepared in accordance with generally accepted accounting principles in the United
States of America and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted accounting principles in the United States of America for
complete financial statements.  In the opinion of management, the unaudited condensed consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of
operations and cash flows of Scientific Technologies Inc. (the "Company") and its subsidiaries for all periods presented.
To prepare these condensed consolidated financial statements in conformity with generally accepted
accounting principles, management of the Company has made a number of estimates and assumptions relating to the reporting of
assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could
differ from those estimates.
The results of operations are not necessarily indicative of the results to be expected in the future or for
the full fiscal year.  It is recommended that these condensed consolidated financial statements be read in conjunction with the
Company's audited consolidated financial statements and the notes thereto included in its 2005 Annual Report on Form 10-K.
The Company is an Oregon corporation and is substantially owned by Scientific Technology
Incorporated, a California corporation (the "Parent"). See discussion of intercompany activities below.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and its subsidiaries after
elimination of all significant intercompany accounts and transactions.
STOCK-BASED COMPENSATION
The 1997 Stock Option Plan (the "Plan") provides for the granting of stock options to employees and
consultants of the Company. Options granted under the Plan may be either incentive stock options or nonqualified stock options.
Incentive stock options ("ISO") may be granted only to Company employees (including officers and directors who are also
employees). Nonqualified stock options ("NSO") and stock purchase rights may be granted to Company employees and
consultants. The Company has reserved 1,000,000 shares of common stock for issuance under the Plan. No person will be eligible to
receive options for more than 250,000 shares in any fiscal year.
Options under the Plan may be granted for periods of up to ten years and at prices no less than 85%
of the estimated fair market value of the shares on the date of grant, provided, however, that (i) the exercise price of an ISO shall not be
less than 100% of the estimated fair market value of the shares on the date of grant, and (ii) the exercise price of an ISO granted to a
10% or more shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. Most options
granted under the Plan through June 30, 2006 vest over a five-year period.

6The Company has reserved 600,000 shares of Common Stock for issuance under the 1997 Employee Stock
Purchase Plan (the "Purchase Plan"). Employees generally will be eligible to participate in the Purchase Plan if they are
customarily employed by the Company for more than 20 hours per week and more than five months in a calendar year and are not (and
would not become as a result of being granted an option under the Purchase Plan) 5% Shareholders of the Company. Under the
Purchase Plan, eligible employees may choose each year to have up to 15% of their eligible annual compensation withheld to purchase
the Company's common stock. Each offering period commences on the first trading day on or after May 1, and November 1 of each
year. The price at which the common stock is purchased under the Purchase Plan is 85% of the lesser of the closing price of the
Company's common stock on the first day of the applicable offering period or on the last day of that purchase period. The Purchase
Plan was terminated on June 15, 2006, in anticipation of the completion of our merger with Omron Corporation.

On December 16, 2004, the Financial Accounting Standard Board ("FASB") issued
Statement No. 123 (revised 2004) ("SFAS No. 123R"), "Share Based Payment," which is a revision of
SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board ("APB")
No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R requires us to expense the fair value of employee
stock options, stock purchases and similar awards and establishes standards for accounting for transactions in which an entity
exchanges its equity instruments for goods. Effective January 1, 2006, the Company adopted these fair value recognition provisions for
all outstanding and unvested share-based payment awards using the modified prospective transition approach, therefore, results for
prior periods have not been restated.  Under SFAS 123R, the cost of employee services received in exchange for an award of equity
instruments is generally measured on the grant date and recognized on a straight-line basis over the period during which an employee
is required to provide service in exchange for the award, usually the vesting period.

When valuing stock-based compensation under SFAS No. 123R or previously under SFAS No. 123, we use the
Black-Scholes option pricing model to determine the fair value of stock options and employee stock purchase plan shares.

In prior years, we accounted for employee stock-based compensation using the intrinsic value method
prescribed by APB No. 25 as allowed under SFAS No. 123. No stock-based compensation for employee stock options or stock
purchases was recognized in our results generally as these plans were non-compensatory. Additionally, we were required to disclose
the impact that the stock-based compensation would have had on net income and earnings per share if we had applied the provisions
of SFAS No. 123.

Stock-based compensation expense of $11,000, net of forfeitures, was recognized as general and
administrative expense during the six months ended June 30, 2006.  Our estimated forfeiture rate for the six months ended June 30,
2006 of 11% was based on historical forfeiture experience. In our pro forma information required under FAS 123 for the periods prior to
fiscal 2006, we accounted for forfeitures as they occurred. As of June 30, 2006 total unrecognized compensation expense related to
unvested options was $72,000.

The following table compares the net income including stock-based compensation recorded under SFAS 123R
in 2006 to the Company's net income and net income per share for the prior year as if the Company had recorded compensation costs
under SFAS No. 123 for all granted stock-based awards (in thousands, except per share amounts).

7Pro-forma 2005 activity under the Plan is set forth below:

Three Months



Six MonthsEnded June 30,



Ended June 30,2005



2005Net income, as reported

$
510


$
529Add: Stock-based compensation expense for employees previously determined under intrinsic value method, net of tax effect


--



--Less: Stock-based compensation expense for employees determined         under fair value based method, net of tax effect


(25)



(25)Pro forma net income

$
485


$
504Net income per share - basic and diluted:As reported

$
0.05


$
0.05Pro forma

$
0.05


$
0.05The following table reflects the assumptions underlying the FAS 123 calculations.

2006

2005Risk interest rate - free

5%

3.4%Volatility

45%

45%Dividend rate

0%

0%Expected life

6.75 Years

6.75 Years

For the six months ended June 30, 2006 options to purchase 32,500 shares of common stock have been
issued.

Information relating to stock options outstanding and exercisable at June 30, 2006 is as follows:

|                             |  | Available for Grant |  | Number of Shares
                  Outstanding |  | Weighted Average Exercise
                  Price
|---------------------------- |  | ------------------- |  | ---------------------------------------------- |  | -------------------------------------------------
|Balance at December 31, 2005 |  | 247,108             |  | 554,666                                        |  | $5.48                                            
|Granted                      |  | --                  |  | --                                             |  | --                                               
|Exercised                    |  | --                  |  | (9,475)                                        |  | $4.22                                            
|Cancelled                    |  | 2,000               |  | (2,000)                                        |  | $5.56                                            
|Balance at March 31, 2006    |  | 249,108             |  | 543,191                                        |  | $5.50                                            
|Granted                      |  | (32,500)            |  | 32,500                                         |  | $6.37                                            
|Exercised                    |  | --                  |  | (6,250)                                        |  | $6.25                                            
|Cancelled                    |  | 2,000               |  | (4,775)                                        |  | $3.95                                            
|Balance at June 30, 2006     |  | 218,608             |  | 564,666                                        |  | $5.57                                            

8

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|                    | Options Outstanding |  |                                                     | Options Vested and Exercisable
|------------------- | ------------------- |  | --------------------------------------------------- | ------------------------------
|Exercise Price      | Number outstanding  |  | Weighted Average Remaining Contractual Life
(Years) |                               
|$3.00   -   $  4.00 | 172,900             |  | 6.1                                                 |                               
|$4.06   -   $  6.00 | 282,600             |  | 4.4                                                 |                               
|$6.16   -   $  7.88 | 100,166             |  | 1.3                                                 |                               
|$8.61   -   $10.30  | 9,000               |  | 3.6                                                 |                               
|                    | 564,666             |  |                                                     |                               

2. INVENTORIES

Inventories consist of the following (in thousands):

|                |   | June 30, |  |   | December 31,
|--------------- | - | -------- |  | - | ------------
|                |   | 2006     |  |   | 2005        
|Finished goods  | $ | 2,738    |  | $ | 2,321       
|Work in process |   | 685      |  |   | 310         
|Subassemblies   |   | 1,658    |  |   | 1,427       
|Raw materials   |   | 3,818    |  |   | 4,356       
|                | $ | 8,899    |  | $ | 8,414       

9

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3. NET INCOME PER SHARE

A reconciliation of the numerators and denominators used to compute basic and diluted
income per common share is provided below.

|                                       |  |   | (In thousands) |  |        | (Per share) |  
|-------------------------------------- |  | - | -------------- |  | ------ | ----------- | -
|                                       |  |   | Income         |  | Shares |             |  
|Three months ended June 30, 2006       |  |   |                |  |        |             |  
|                                       |  |   |                |  |        |             |  
|Basic earnings per share calculation   |  | $ | 156            |  | 9,795  |             | $
|                                       |  |   |                |  |        |             |  
|Effect of dilutive securities          |  |   |                |  |        |             |  
|Stock options                          |  |   |                |  | 258    |             |  
|                                       |  |   |                |  |        |             |  
|Diluted earnings per share calculation |  | $ | 156            |  | 10,053 |             | $
|                                       |  |   |                |  |        |             |  
|Three months ended June 30, 2005       |  |   |                |  |        |             |  
|                                       |  |   |                |  |        |             |  
|Basic earnings per share calculation   |  | $ | 510            |  | 9,772  |             | $
|                                       |  |   |                |  |        |             |  
|Effect of dilutive securities          |  |   |                |  |        |             |  
|Stock options                          |  |   |                |  | -      |             |  
|                                       |  |   |                |  |        |             |  
|Diluted earnings per share calculation |  | $ | 510            |  | 9,772  |             | $
|                                       |  |   |                |  |        |             |  
|                                       |  |   |                |  |        |             |  
|Six months ended June 30, 2006         |  |   |                |  |        |             |  
|                                       |  |   |                |  |        |             |  
|Basic earnings per share calculation   |  | $ | 650            |  | 9,788  |             | $
|                                       |  |   |                |  |        |             |  
|Effect of dilutive securities          |  |   |                |  |        |             |  
|Stock options                          |  |   |                |  | 205    |             |  
|                                       |  |   |                |  |        |             |  
|Diluted earnings per share calculation |  | $ | 650            |  | 9,993  |             | $
|                                       |  |   |                |  |        |             |  
|Six months ended June 30, 2005         |  |   |                |  |        |             |  
|                                       |  |   |                |  |        |             |  
|Basic earnings per share calculation   |  | $ | 529            |  | 9,770  |             | $
|                                       |  |   |                |  |        |             |  
|Effect of dilutive securities          |  |   |                |  |        |             |  
|Stock options                          |  |   |                |  | 4      |             |  
|                                       |  |   |                |  |        |             |  
|Diluted earnings per share calculation |  | $ | 529            |  | 9,774  |             | $

4. RELATED PARTY TRANSACTIONS

The Company provides certain management services to the Parent such as general
management and accounting services. The Company charges the cost of these services to the Parent based upon the amount of time
employees spent providing these services.  Management services charged by the Company to the Parent for the six months ending
June 30, 2006 and 2005 totaled $150,000.

The Company leases essentially all of a 95,700 square foot facility owned by an affiliate of the Parent.
The Company also leases a 25,000 square foot facility in Logan, Utah owned by the same affiliate. Overhead costs are allocated
primarily on the basis of square footage utilized by each party. The amounts paid to this affiliate were $277,000 and $257,000 per
quarter during the quarters ended June 30, 2006 and 2005, respectively.

10

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The Company utilizes a receivable from/payable to Parent account to record activity including cash
received, cash disbursed and amounts owed to and receivable from the Parent for allocated charges. The net effect of transactions with
the Parent resulted in a receivable from Parent of $300,000 at June 30, 2006.

The Company is included in the consolidated tax return of the Parent, but provides for income taxes
on a separate return basis.

The Company owns 50% of Aurora Technology Pte. Ltd ("Aurora"), in a joint venture with
Amplus Communication Pte. Ltd. Aurora, a Singapore manufacturing company, manufactures and sells sub-assemblies and other
components to the Company and others.  Amounts purchased from Aurora for the six months ended June 30, 2006 were $2,696,000.
The carrying value of the Company's investment in Aurora, which is accounted for under the equity method, amounted to approximately
$840,000 at June 30, 2006 and $713,000 at December 31, 2005.

5. RETIREMENT SAVINGS PLAN

The Company adopted a defined contribution retirement savings plan under Section 401(k) of the
Internal Revenue Code.  This plan covers substantially all employees who meet minimum age and service requirements and allows
participants to defer a portion of their annual compensation on a pre-tax basis.  The plan allows employer's matching contributions
equal to 50% of employees' contributions subject to a maximum of 4% . Contributions to the plan may be made at the discretion of the
Board of Directors. The Company contributed $94,000 and $162,000, respectively for the three and six months ended June 30, 2006
compared to $64,000 and $125,000 for the comparable periods in 2005.

6. SEGMENT REPORTING AND OTHER INFORMATION

The Company is organized into two business segments: Safety Products Group, whose products include safety
light curtains, safety interlocks and relays, safety mats and controllers, safety contact strips, and optical profiling scanners, and
installation services, and Automation Products Group, whose products include photoelectric and fiberoptic sensors, control
components, power monitoring electronics, defense electronics, industrial control microcomputers, peripherals and software, level and
flow sensors, non-contact ultrasonic sensors and controllers, pressure transducers, digital pressure gauges, displacement and velocity
transducers and pressure comparators.

11

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Financial information for each product group is as follows: (in thousands)

|                              |  |   | Three Months   |  |   | Six Months     | 
|----------------------------- |  | - | -------------- |  | - | -------------- | 
|                              |  |   | Ended June 30, |  |   | Ended June 30, | 
|                              |  |   | 2006           |  |   | 2005           | 
|Safety Products               |  |   |                |  |   |                | 
|Sales                         |  | $ | 14,553         |  | $ | 12,809         | 
|Group operating profit        |  |   | 65             |  |   | 850            | 
|                              |  |   |                |  |   |                | 
|Automation Products           |  |   |                |  |   |                | 
|Sales                         |  | $ | 2,635          |  | $ | 2,132          | 
|Group operating profit (loss) |  |   | 33             |  |   | (189)          | 
|                              |  |   |                |  |   |                | 
|                              |  |   |                |  |   |                | 
|                              |  |   | At             |  |   |                | 
|                              |  |   | Jun. 30,       |  |   | Dec. 31,       | 
|                              |  |   | 2006           |  |   | 2005           | 
|Total Assets                  |  |   |                |  |   |                | 
|Safety Products               |  | $ | 28,432         |  | $ | 28,935         | 
|Automation Products           |  |   | 9,585          |  |   | 6,787          | 
|                              |  |   |                |  |   |                | 
|Total                         |  | $ | 38,017         |  | $ | 35,722         | 

The Company operates principally in the United States. Sales to foreign customers represented 16% and 17%
of total sales in the three and six months ended June 30, 2006, respectively, compared to 13% in the comparable periods in 2005.

7. COMMITMENTS AND CONTINGENCIES

The Company offers warranties on certain products and records a liability for the estimated future costs
associated with warranty claims, which is based upon historical experience and the Company's estimate of the level of future costs. A
reconciliation of the changes in the Company's warranty liability follows (in thousands):

|                                        |  |   | Three Months Ended June 30, | 
|--------------------------------------- |  | - | --------------------------- | 
|                                        |  |   | 2006                        | 
|Warranty accrual at beginning of period |  | $ | 284                         | 
|Accruals for warranties issued          |  |   | 57                          | 
|Expenses incurred                       |  |   | (55)                        | 
|                                        |  | $ | 286                         | 
|                                        |  |   |                             | 
|                                        |  |   | Six Months Ended June 30,   | 
|                                        |  |   | 2006                        | 
|Warranty accrual at beginning of period |  | $ | 286                         | 
|Accruals for warranties issued          |  |   | 106                         | 
|Expenses incurred                       |  |   | (106)                       | 
|                                        |  | $ | 286                         | 

As permitted under Oregon law the Company has agreements whereby the Company indemnifies its
officers and directors for certain events or occurrences while the officer or director is, or was serving at the Company's request in such
capacity. The indemnification term is for the period that the officer or director is serving in such capacity or is subject to any possible
claim or action by reason of the fact that the Indemnitee was serving in that capacity. The maximum potential amount of future
payments by the Company could be unlimited; however the Company has a director and officer insurance policy that limits the
Company's exposure and enables the Company to recover a portion

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of any future amounts paid. As a result of the insurance policy
coverage, the Company believes that the estimated fair value of these agreements is minimal.

8. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (FASB) issued interpretation No. 48, Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and
transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently assessing the impact of FIN 48 on
our financial statements.

9. MERGER WITH OMRON CORPORATION

On April 25, 2006 the Company announced that it had entered into a definitive agreement with a subsidiary of
Omron Corporation ("Omron") whereby Omron will acquire the Safety Products Group ("SPG") of the Company.
The Company has separately entered into an agreement to sell its Automation Products Group ("APG") to a new company
formed by members of the Lazzara family who currently serve as officers and directors of the Company. The estimated value of the
transaction is comprised of $94 million for SPG, $6 million for APG, plus an estimate for certain corporate assets, including cash net of
certain liabilities and estimated transaction related expenses.  In total, the Company estimates that the transactions would value the
equity of the Company at approximately $107 million, or approximately $10.62 per fully diluted share. The Company expects the
transaction to close in the third quarter of 2006. These agreements are subject to shareholder approval and customary closing
conditions.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This interim report on Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Such forward-looking statements include, but are not
limited to, statements regarding our planned merger with Omron, the sufficiency of existing cash and future cash flows to satisfy future
operating and capital requirements.   The Company's actual results could differ materially from those projected in such forward-looking
statements as a result of many factors, including, without limitation, those set forth under this section, the section entitled "Risk Factors"
below in Item 1A of Part II and elsewhere in this report on Form 10-Q.

Results of Operations

(Amounts in thousands, except percentages)

Scientific Technologies Incorporated (the "Company") is headquartered in Fremont,
California and designs, manufactures and distributes electrical and electronic industrial controls such as machine safety and automation
sensing products. Our product lines include safety light curtains, safety interlock switches, safety relays, profiling scanners, factory
automation sensors, controls, fiber optics, power monitoring, safety mats, safety contact strips, non-contact ultrasonic sensors and
controllers, pressure transducers and other electronic equipment supplied to industrial automation, commercial and defense customers.
We are organized into two product groups, The Safety Products Group (SPG), comprised of the Optical Sensor Division (OSD) and the
Machine Services Division (MSD), and the Automation Products Group (APG).

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Sales for the three and six months ended June 30, 2006 increased 15% and 13% respectively to
$17,188 and $33,150 from $14,941 and $29,239 in the comparable 2005 periods. Second quarter and six months 2006 sales for our
SPG segment grew to $14,553 and $28,273, increasing 14% and 12% respectively over $12,809 and $25,182 reported in the same
periods in 2005. Within SPG, OSD sales grew 13% in the three and six months ended June 30, 2006 from the comparable periods in
2005, a result of growth in all product lines, especially the OS3100 and our private label light curtain products. Also within SPG, MSD
reflected a 22% increase in the second quarter of 2006 compared to the first quarter of 2005 and a 7% increase in sales for the first half
of 2006 compared to the first half of 2005, the result of increased project revenue. For the three and six months ended June 30, 2006,
our APG segment recorded 24% and 20% sales growth over the same periods in 2005. This was the result of higher sales of level
sensor and control components products compared to the same periods in 2005,

For the three and six months ended June 30, 2006, gross profit as a percent of sales (gross margin) improved
to 42% from the 41% and 40% recorded in the same periods in 2005. SPG gross margin for the second quarter of 2006 and 2005
remained constant at 42%, while year to date 2006 margins improved to 43% from the 41% recorded in the first six months of 2005. At
OSD, interlocks and mats reported higher margins due to a change in sales product mix to those with a lower relative cost of sales.
MSD reported gross profit improvements in service revenue due to improved labor utilization on higher revenue. APG gross margin
improved to 42% and 41% during the quarter and six months ended June 30, 2006 compared to 41% and 37% in 2005. This was
primarily due to the increased volume and a shift in sales mix to level sensor and control component products, which carry a lower
relative cost of sales.

Selling, general and administrative expenses for the three and six months ended June 30, 2006
increased 36% and 23%, respectively to $5,906 and $10,836 from $4,340 and $8,776 in the same 2005 periods. This was primarily the
result of approximately $1,088 in transaction costs incurred associated with our recently announced pending merger with Omron
Corporation and the sale of APG, costs associated with higher sales; such as commissions, advertising, printing and other sales
support expenses; currency fluctuations and to a lesser extent, increased expenses associated with our sales office in China. During
the second half of 2005, we opened a sales and service office in China to expand our global presence and take advantage of
opportunities available in this large marketplace. As a percentage of sales for the three and six months ended June 30, 2006, selling,
general and administrative expenses were 34% and 33%, respectively.



Research and development expenses were unchanged at $1,122 for the second quarter of 2006 and
2005. Year to date research and development expenses increased 5% to $2,282 from the $2,164 in 2005, as a result of increased
material and outside product certification expenses, partially offset by lower consulting expenses. As a percentage of sales, research
and development expenses were 7% in the second quarter and first six months of 2006, compared to 8% and 7% in the same periods
of 2005.

The effective tax rate as of June 30, 2006 was 39% compared to 32% in the comparable 2005 period
This was the result of the expiration of the federal research and development credit.

Contractual Obligations

The Company has no raw material contracts exceeding one year in
duration. In addition, the Company leases production, warehouse and corporate office space as well as certain equipment under
non-cancelable operating lease agreements.  All building leases have renewal options and all include cost of living adjustments. The
following table summarizes the estimated annual obligations.

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|                        |  |   | Payments due by period (in thousands) |  
|----------------------- |  | - | ------------------------------------- | -
|                        |  |   |                                       |  
|Contractual Obligations |  |   | Total                                 |  
|Operating Leases        |  | $ | 5,475                                 | $
|Total                   |  | $ | 5,475                                 | $

Liquidity and Capital Resources

(Amounts in thousands)

We had cash and cash equivalents at June 30, 2006 and December 31, 2005 of approximately $6,356
and $4,773, respectively. Our short-term investments were $2,428 and $2,480 at June 30, 2006 and December 31, 2005,
respectively.

For the six months ended June 30, 2006 cash provided by operations was $2,333 compared to $1,038
provided by operations in the same period in 2005. Net income was $121 higher in the six months ended June 30, 2006, compared to
the same period in 2005. In addition, in anticipation of increased sales, we increased inventory by $485 during the first six months of
2006 compared to a reduction of $507 in the first six months of 2005. Receivable from Parent increased by $72 in the six months ended
June 30, 2006, compared to a $140 reduction in the same 2005 period. Accounts payable increased by $1,166, and accrued expenses
by $176 in the six months ended June 30, 2006, respectively, primarily due to unpaid merger related expenses, compared to an
increase of $341 and a reduction of $575 in the comparable period in 2005. This was offset by the $72 increase in accounts receivable
and the $88 decrease in other assets in the first six months of 2006 compared to increases of $626 and $131, respectively in the
comparable 2005 period.

Available bank borrowings were $6,000, all of which were unused at June 30, 2006 and 2005.
The Company's revolving line of credit was renewed in 2006 through June 30, 2007. We are in compliance with all loan covenants
under this facility.

We believe that our existing cash and cash equivalent balances, short-term investments and
anticipated cash flows from operations will be sufficient to meet our operating and capital requirements for at least the next
12 months. However, revenues could decline below our expectations resulting in insufficient cash flow from operations or we may
require additional financing to fund new product development, strategic investments in new markets, and strategic acquisitions. As a
result, we could be required, or could elect, to raise additional funds during that period and we may need to raise additional capital in
the future. Additional capital may not be available at all, or may only be available on terms unfavorable to us. With the exception of
operating leases, we have not entered into any off-balance sheet financing arrangements, we have not established any variable interest
entities, we do not have any unconditional purchase obligations, nor do we have non-cancelable commitments for capital
expenditures.

On April 24, 2006 our Parent Company entered into an agreement whereby its shareholders will sell all of
Parent's outstanding Capital Stock to an affiliate of Omron Corporation. In connection with that agreement, we entered into an
agreement and plan of merger whereby we will become a wholly owned subsidiary of Omron. These agreements are subject to
shareholder approval and customary closing conditions.

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Critical Accounting Policies

There were no material changes in any of our critical accounting estimates or judgments during the first quarter of 2006.

Revenue Recognition

The Company has product and services sales. Revenue
from product sales to OEM's and distributors is recognized upon shipment when shipped FOB our plant or upon receipt by the
customer when shipped FOB destination, if a signed purchase order exists, the price is fixed or determinable, collection of the resulting
receivable is considered reasonably assured and product returns can be reasonably estimated. Subsequent to the sale of the products,
we have no obligation to provide any modification or customization, upgrades, enhancements or post contract customer support.

Our agreements with our distributors include certain product rotation, price protection, and warranty
rights. All distributors have the right to rotate slow moving products four times each fiscal year. The maximum dollar value of inventory
eligible for rotation is equal to eight percent of our products purchased by the distributor during the previous fiscal year.  In order to take
advantage of their product rotation rights, the distributors must order and take delivery of additional products equal to at least the dollar
value of the products that they want to rotate. Reserves for the right of return and restocking are established based on the requirements
of Statement of Financial Accounting Standards ("SFAS") 48, "Revenue Recognition when Right of Return
Exists" because we have visibility into our distributor's inventory and have sufficient history to estimate returns. We record a
reserve based on historical trend. Stock rotation and returns estimates are recorded as reductions of sales and cost of sales.

Each distributor is also allowed certain rebates and price protection rights. If and when we reduce or
plan to reduce the price of any of our products and the distributor is holding any of the affected products in inventory, we will credit the
distributor the difference in price when it places its next order with us. We record an allowance for price protection reducing our net
sales and increasing our accrued liabilities based on specific terms and historical trend. Price protection estimates are recorded as
reductions of sales and warranty estimates are recorded against cost of sales.

The Company provides a warranty to its customers for a period of 12 to 18 months. Upon revenue recognition,
we provide for the estimated costs that may be incurred for product warranties. We estimate sales returns and warranty costs based on
historical experience and the best information we have at the time we report our financial statements. Actual results could differ from
these estimates. Warranty expenses are recorded against cost of sales.

Installation and engineering service revenue is recognized when services are rendered, or when an
identifiable portion of the contract is completed, no significant post-delivery obligations exist and collection of the resulting receivable is
considered reasonably assured.

Inventory Valuation

We value our inventory at the lower of the actual cost to purchase and/or manufacture the inventory or
the current estimated market value of the inventory. We regularly review inventory quantities on hand and may write-down excess and
obsolete inventory based primarily on our historical consumption and our estimated forecast of product demand and production
requirements. Demand for our products can fluctuate significantly. In addition, our industry is characterized by technological change,
new product development, and product obsolescence that could result in an increase in the amount of obsolete inventory quantities on
hand. Our estimates of future product

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demand may differ from actual results, in which case we may adjust the provision required for
excess and obsolete inventory. In the future, if our inventory is determined to be overvalued, we would be required to recognize such
costs in our cost of goods sold at the time of such determination. Likewise, if our inventory is determined to be undervalued, we may
have over-reported our costs of goods sold in previous periods and would be required to recognize such additional operating income at
the time of sale. Therefore, although we make every effort to ensure the accuracy of our forecasts of future product demand, any
significant unanticipated changes in demand or technological developments could have a significant impact on the value of our
inventory and our reported operating results.

Allowance for Doubtful Accounts

We maintain allowances for estimated losses from the inability of our customers to make required
payments. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the
customer's current credit worthiness, as determined by our review of their current credit information. We continuously monitor
collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience
and any specific customer collection issues that we have identified. While such credit losses have historically been within our
expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we
had in the past. A significant change in the liquidity or financial position of any one of our customers could have an adverse impact on
the collectability of our accounts receivable and our future operating results. An account is written off or written down to its net
realizable value, when we determine that and it is in bankruptcy, liquidation or cannot be located or the cost of collection exceeds the
realizable value of the account.

Valuation of Goodwill and Other Long-Lived Assets

We review the recoverability of our long-lived assets, such as fixed assets, goodwill, intangible
assets and investments, when events or changes in circumstances indicate that the carrying amount of the asset or asset group may
not be recoverable. We had no such impairment trigger event in the three and six months ended June 30, 2006. The assessment of
possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax
cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of
such asset, an impairment loss is recognized for the difference between the estimated fair value and carrying value. The measurement
of impairment requires management to estimate future cash flows and the fair value of long-termed assets. In addition, we review the
valuation of goodwill at least annually. Based on our review of the cash flows relative to the acquisition of MSD, Lundahl Instruments
and PSI-Tronix, we believe the goodwill and other long-lived assets are not stated at more than their fair value.

The market risk inherent in our investments represents the potential loss arising from adverse changes in
interest rates.  We are exposed to market risk in the area of interest rate changes impacting the fair value of our investment securities.
Our policy is to invest primarily in money market accounts and short-term investments held at financial institutions. We do not have any
derivative instruments in our investment portfolio. Due to their highly liquid nature, our investments are subject to minimal credit and
market risk.

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Item 4. CONTROLS AND PROCEDURES.







PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

In March 2006, Sick A.G., a German corporation, and Sick, Inc., a Minnesota corporation, filed a complaint
against us for patent infringement in the United States District Court for the Northern District of California.  The Sick complaint
seeks injunctive relief, damages, attorneys' fees and costs.  We intend to vigorously defend our intellectual property and believe
that we have meritorious defenses to this infringement claim; litigation is inherently uncertain, however, and we may not prevail in this
matter.

Item 1A. RISK FACTORS

Because of the variety of factors and uncertainties affecting our operating results, past financial
performance and historical trends may not be a reliable indicator of future performance. These factors, as well as other factors affecting
our operating performance, may result in significant volatility in our common stock price. Among the factors which could affect our future
business, financial condition or operating results are the following:

Our operating results may fluctuate.

We have experienced fluctuations in annual and quarterly operating results and anticipate that these
fluctuations will continue, which may cause the trading price of our common stock to decline.  These fluctuations are caused by a
number of factors described below and elsewhere in this section, including:

- the level and timing of customer orders;
- fluctuations in demand for complementary third party products with which our products are sold;
- changes in the mix of our products sold;
- timing of operating expenditures;
- timing of new product introductions;
- fluctuations in prices charged by our suppliers;
- seasonality of sales within our core markets;
- volatility in supply and demand affecting industrial control products generally, such as increases in the
supply of competitive products and declines in selling prices; and
- economic conditions in the U.S. and abroad.

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Our sales are dependent on independent distributors.

A majority of our sales are through third party distributors, system integrators and original equipment
manufacturers. These resellers are not required to offer our products exclusively. We cannot assure that a reseller will continue to offer
our products. In addition many of our resellers are privately owned firms which may not be well capitalized. If our ability to sell products
through these third parties is impaired, our results of operations would likely suffer.

The industrial manufacturing equipment industry, and the markets of customers that use our
products, are highly cyclical.

Our continued success depends in large part on the vibrancy of various industries that use our
products.  We operate in a cyclical industry that has been subject to significant economic downturns often in connection with, or
in anticipation of, declines in general economic conditions.  These types of downturns have occurred numerous times in the past,
most recently in 2001.  During such downturns, we experience reduced product demand, erosion of average selling prices and
gross margins. Our business could be harmed in the future by additional cyclical downturns in the industrial manufacturing
equipment industry or by slower growth by any of the markets served by our customers' products.

The markets in which we participate are intensely competitive.

Our core markets are intensely competitive. Many competitors have substantially greater name recognition
and technical, marketing, distribution and financial resources than we have, and we may not be able to compete successfully with them
in the future.  Competitive pressures could also reduce market acceptance of our products and result in price reductions, decreases in
revenues and increases in expenses.  Competition in our core markets is based primarily on performance, quality, price and availability.
If we do not compete successfully on these and other factors, our business, financial condition and operating results would be
harmed.

Average sales prices of our products generally decline over time.

Average sales prices in the industrial manufacturing equipment market tend to decline over time as a result of competition,
technological advances, manufacturing efficiencies and other factors.  Declines in average sales prices for our products, if not
offset by reductions in the cost of producing those products or by sales of new products with higher gross margins, would decrease our
gross margins, could cause a negative adjustment to the value of our inventories and could materially and adversely affect our
operating results.

We do not have long term contracts with our customers.

Our customers generally purchase our products on a purchase-order basis and do not have long-term contracts with us.  As a
result, we cannot be certain that our customers will continue to order products from us at the same or higher levels as in the past.  The
loss of one or more significant customers, or a decline in overall orders from our customers, would harm our business and operating
results.

In addition, the lack of long-term sales contracts and significant order backlog makes it difficult for us
to forecast future sales with certainty or to accurately forecast component and product requirements. These factors expose us to a
number of risks:

- if we overestimate our requirements we may be obligated to purchase more components or third-party
products than are required;
- if we underestimate our requirements, our suppliers may have an inadequate product or product
component inventory, which could interrupt manufacturing of our products and result in delays in shipments and revenues;

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- we may also experience shortages of product components from time to time, which also could delay the
manufacturing of our products; and
- over or under production can lead to higher expenses, lower than anticipated revenues, and reduced
margins.

We may be unable to increase our international sales.

We are attempting to develop, integrate and expand our international distribution networks in an effort to
increase international sales of our products. We may not be successful in developing or expanding our international distribution network
or in marketing and selling products in foreign markets. If the revenues generated by our international sales are not adequate to recover
the expense of establishing, expanding, and maintaining an international distribution network, our business, financial condition, and
results of operations could be materially adversely affected. If international sales become a more significant component of net sales,
our business would be more vulnerable to risks inherent in doing business internationally, including:

- difficulties in managing foreign resellers;
- longer payment cycles and problems in collecting accounts receivable;
- the effects of seasonal customer demand;
- changes in regulatory requirements;
- difficulties in meeting the requirements of different international product regulations;
- risks relating to intellectual property rights;
- increased expenses due to efforts to localize our product offerings;
- export restrictions, tariffs and other trade barriers;
- fluctuations in currency exchange rates; and
- potentially adverse tax consequences and political instability.

The existence or occurrence of any one of these factors could have a material adverse effect on our business,
financial condition, and results of operations.

Our business could suffer if we are experience delays or are unable to transition certain of our products to
conformance with new European hazardous substance regulations.

The legislative and commercial actions in Europe regarding hazardous substances have brought a new
level of environmental awareness to industrial equipment industries.  Certain of our products that may fall within the scope of the
Restriction on Hazardous Substances (RoHS) Directive may be required to conform to the new emerging restrictions and conventions.
Delays or failure to transition current products to environmental compliance for the broad range of countries where our products are
deployed may negatively impact revenues. Further, many of our commercial parts suppliers and contract manufacturers have begun or
completed the conversion to meet this new emerging requirement.  Should these efforts be delayed our supply chain of qualified
components could prevent STI from meeting the deadline for compliance.  Also our cost to become compliant could become more than
currently projected, therefore negatively impacting our revenues and margin performance.

We depend upon suppliers and outsourced manufacturers, several of which are located
outside of the U.S.  Disruption of our access to these supplies and services, or problems with the quality of supplies or services, could
prevent us from filling customer orders and harm our business.

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The principal components of our products are purchased from outside
vendors. We generally buy components under purchase orders, do not have long-term agreements with our suppliers, and we generally
do not maintain large inventories of components. Any termination of, or significant disruption of, our relationships with the suppliers of
our product components may prevent us from filling customer orders in a timely manner which could result in customer dissatisfaction
and lost sales.

For some of our products, including private label
products, we rely on third party manufacturers for subassembly of products and for final assembly, quality assurance, and testing of
some of our products. These outsourcing arrangements and any future outsourcing arrangements involve numerous risks, including
reduced control over product quality, delivery schedules, manufacturing yields, and costs.

For certain products that we private label, we are dependent on third party suppliers.

We rely on third party suppliers for several finished products that we sell under the STI brand name.  If we
do not manage the relationship with the supplier properly or if the supplier stops providing us with these products, we may not be able
to find replacement products in a timely manner or at all.  This may prevent us from fulfilling customer orders and have an adverse
impact on our financial results.

Our business could suffer if we do not respond to technological change and new product development demands of our
customers.

The market for our products is characterized by changing technology, evolving industry standards,
changes in customer needs and new product introductions. Our future success will depend on our ability to respond to emerging
industry standards, enhance current products, develop new products, and achieve market acceptance of those products, all on a timely
and cost-effective basis. The introduction of new products also requires that we manage the transition from older products in order to
minimize disruption of customer orders, avoid excessive levels of older product inventories and ensure that adequate supplies of new
products can be delivered to meet customer demands.



Product errors or defects could result in product recalls and claims against us.

We manufacture machine safety and automation sensing products, many of which are used in
manufacturing, construction and other industrial environments.  Errors or defects in our products could contribute to injuries, and could
subject us to product liability claims.  Any such claims would divert management's attention from our core business, would be
expensive to defend, and could result in sizeable damage awards against us. Our existing product liability insurance coverage may be
inadequate to protect us from any liabilities we might incur, and we may not be able to maintain this insurance or do so at a reasonable
cost or on reasonable terms. Any product liability claim brought against us, with or without merit, could also increase our product liability
insurance rates or prevent us from securing any coverage in the future. If a product liability claim or series of claims is brought against
us for uninsured liabilities or is in excess of our insurance coverage, our business would suffer. In addition, such claims may require us
to recall some of our products, which could result in significant costs to us.

Fluctuations in currency exchange rates would have an adverse effect on our operating results
and financial condition.

While substantially all of our sales are denominated in U.S. dollars, we purchase material for resale
denominated in British pounds and Euros, and, in the future, we may transact business in other foreign currencies. Increases in value of
the U.S. dollar relative to foreign currencies have the effect of increasing the prices of our products in foreign markets and, as a result,
could harm sales of our products in those markets.  Conversely, declines in value of the U.S. dollar relative to foreign currencies, as we
have recently experienced, has the effect of increasing our operating expenses by

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increasing the cost of materials we purchase for
resale in British pounds and Euros.  As a result, future volatility in currency exchange rates would have an adverse effect on our
operating results.

We have identified in the past, and may identify in the future, material weaknesses in our
internal control over financial reporting, which could damage public perception of our financial statements and cause our stock price to
decline.

In the course of preparing our financial statements for fiscal year ended December 31, 2004, we and our
auditors identified material weaknesses, as defined in Public Company Accounting Oversight Board Standard No. 2, in our
internal control over financial reporting. Specifically, material weaknesses were identified with respect to inadequate preparation and
insufficient review and analysis of certain financial statement account reconciliations; lack of documented policies and procedures
related to changes and updates in our accounting system; and lack of sufficient personnel with appropriate qualifications and training in
certain key accounting roles and adherence to certain control disciplines within the accounting and financial reporting function.

Although we have taken steps to remediate these material weaknesses, we cannot assure you that we will not
in the future identify material weaknesses or significant deficiencies in our internal control over financial reporting that we have not
discovered to date or that may arise in the future.  In such case, we could lose investor confidence in the accuracy and completeness of
our financial reports, which could have an adverse effect on our stock price.

Our business could suffer if we are unable to protect and enforce our intellectual property rights.

We rely on a combination of patent, trademark, trade secret laws and contractual restrictions to establish
and protect proprietary rights in our products and services. There can be no assurance that our patents, trademarks, or contractual
arrangements or other steps taken by us to protect our intellectual property will prove sufficient to prevent misappropriation of our
technology or defer independent third party development of similar technologies. Moreover, there can be no assurance that the
technology licenses granted to us from our parent company will continue to be available. The loss of any of our proprietary technology
could require us to obtain technology of lower quality or performance standards or at greater cost, which could materially adversely
affect our business, results of operations and financial condition. Also, competitors may develop their own intellectual property or
technologies, obtain their own patents, or challenge the validity of, or be able to design around, our patents. The laws of certain foreign
countries may not protect our products, services or intellectual property rights to the same extent as do the laws of the United States.

We may initiate claims or litigation against other third parties for infringement of proprietary rights or to
establish the validity of proprietary rights. Similarly, our competitors may initiate claims or litigation against us alleging infringement of
their proprietary rights or improper use of their intellectual property.  Litigation relating to intellectual property to which we may become
a party is subject to numerous risks and uncertainties, including the risk of counterclaims or other litigation against us, and we may not
be successful in any such litigation.

Our ability to develop and market our products is dependent upon our retention of certain
executive officers and other key personnel.

We are greatly dependent on the ability to retain key management and
technical personnel, and our future success is highly dependent upon the personal efforts of our management and technical personnel.
The loss of services of any one of them could have a material adverse effect on our business, financial condition, and results of
operations.  Our success will also be dependent in part upon our ability to attract, retain, and motivate highly skilled employees.  We
may need to offer additional compensation or incentives to attract and retain these and other employees.

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We may need to raise additional capital.

It is possible we may need to raise additional funds in the future, and this additional financing may not be
available to us in favorable terms, if at all. We may also require additional capital to acquire or invest in complementary businesses or
products or obtain the right to use complementary technologies. If we issue additional equity securities to raise funds, the ownership
percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those
of existing holders of our common stock. If we issue debt securities to raise funds, we may incur significant interest expense, which
would harm our profitability. The issuance of debt securities may also require us to agree to various restrictions typical of debt
securities, including limitations on further borrowing and our right to pay dividends.

Our operations have been and may continue to be negatively impacted by uncertain global
economic and political conditions.

Our business may suffer as a result of general economic and political conditions in the U.S. and abroad.  In
2003 and 2002, there was a rapid and severe downturn in the U.S. market and global economy.  This downturn has been compounded
by terrorist activity, such as the attacks in the U.S. on September 11, 2001, and the military activity in Afghanistan, Iraq and the Middle
East.  Additional terrorist acts or acts of war could cause damage or disruption to us or to our suppliers and our customers.  Fears of
global recession, war, and terrorism may continue to have seriously detrimental effects on the U.S. and global economies.  Such
conditions could further dampen consumer confidence and cause our customers to slow or cease spending on our products.  If these
events continue, our operations may be negatively impacted.

The seasonality inherent in our business could cause our operating results to fluctuate.

The industrial manufacturing equipment industry in which we compete has historically been subject to
seasonality. This is also true with respect to European markets in which we compete where business activity declines due to vacations
taken in the summer months. This seasonality, combined with other factors such as the variability in our operating results described
above, renders quarter-to-quarter comparisons of our results of operations unreliable as indicia of our overall performance.

Our Parent company has voting control over us, and our planned merger with Omron causes
uncertainties.

Approximately eighty-six percent (86%) of our capital stock is currently held by our Parent corporation,
Scientific Technology Incorporated, a California corporation. As a result, our Parent has control over matters requiring approval by our
shareholders, including the election of directors and the approval of mergers or similar transactions, even if other shareholders
disagree.   This control, along with provisions of Oregon law affecting acquisitions and business combinations, may delay, deter or
prevent a third party from acquiring or merging with us and prevent shareholders from realizing a premium price for their shares
associated with an acquisition. This voting control and provisions of Oregon law may also have a negative effect on the market price of
our common stock.

On April 24, 2006 our Parent Company entered into an agreement whereby its shareholders will sell
all of Parent's outstanding capital stock to an affiliate of Omron Corporation. In connection with that agreement, we entered into an
agreement and plan of merger whereby we will become a wholly owned subsidiary of Omron. These agreements are subject to
shareholder approval and customary closing conditions. In the event that the merger is not completed, the price of our common stock
could be negatively affected and we will have incurred substantial transaction expenses for which no ultimate benefit will be received. In
addition, the diversion of management attention from our day-to-day business and the unavoidable disruption to our employees and
relationships with customers as a result of efforts and uncertainties relating to our anticipated merger with Omron may detract from

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our ability to grow revenues and minimize costs, which, in turn may lead to a loss of market position that we could be unable to
regain if the merger does not occur. Moreover, the delay in closing the planned merger could have an adverse effect on our revenues in the
near-term if customers delay, defer, or cancel purchases pending completion of the planned merger with Omron.

Items 2 through 5 are not applicable for this reporting period.

Item 6. EXHIBITS.

The following documents are filed as a part of this Report:

|Exhibit 31.1 - | Section 302 Certification of Chief Executive Officer
      PDF                     
|-------------- | -----------------------------------------------------------------------------------
|Exhibit 31.2 - | Section 302 Certification of Chief Financial Officer
      PDF                     
|Exhibit 32.1 - | Section 906 Certification of Chief Executive and Chief Financial Officers
      PDF

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


SCIENTIFIC TECHNOLOGIES INCORPORATED
            RegistrantDate: August 14, 2006

/s/Joseph J. Lazzara
                  Joseph J. Lazzara
                  President and Chief Executive Officer
                  (Principal Executive Officer)Date: August 14, 2006

/s/ Richard O. Faria
                  Richard O. Faria
                  Vice-President and Chief Financial Officer
                  (Principal Financial Officer)25